XL Capital Reports Third Quarter 2007 Net Income of $328.0 Million, or $1.82 Per Ordinary Share

HAMILTON, BERMUDATue Oct 23, 2007 —

First Nine Months of 2007 Net Income of $1.42 billion, or $7.89 per ordinary share

Third Quarter Highlights

• "Net income excluding net realized gains and losses"(1) was a record
$562.8 million, or $3.13 per ordinary share

• Total net investment income increased 9.6% to $568.0 million

• Combined ratio from P&C operations was 85.3%

• Return on ordinary shareholders' equity, based on "net income excluding
net realized gains and losses"(1), was 22.3% for the quarter
(annualized)

• Diluted book value per ordinary share increased to $56.29 from $54.74
at June 30, 2007

HAMILTON, Bermuda, Oct. 23 XL Capital Ltd ("XL"
or the "Company") today reported net income available to ordinary
shareholders for the quarter ended September 30, 2007 of $328.0 million, or
$1.82 per ordinary share, compared with net income of $415.8 million, or $2.32
per ordinary share, for the quarter ended September 30, 2006. Included in net
income for the quarter ended September 30, 2007 are net realized losses on
investments of $160.2 million and net realized and unrealized losses on
derivative instruments of $58.2 million.

"Net income excluding net realized gains and losses"(1) for the third
quarter of 2007 was a record $562.8 million, or $3.13 per ordinary share,
compared with $468.7 million, or $2.61 per ordinary share, for the prior year
period. As this is the first full quarter in which the Company has accounted
for Security Capital Assurance Ltd ("SCA") as an affiliate, the Company has
amended its definition of "Net income excluding net realized gains and
losses". The definition now excludes the Company's share of net realized
gains and losses on investments, net realized and unrealized losses on credit,
structured financial and investment derivatives, net of tax, for SCA and the
Company's other insurance company operating affiliates. "Net income excluding
net realized gains and losses" in prior periods has been amended to conform
with the current period presentation. There was no effect on net income as a
result of these changes.

For the first nine months of 2007, net income available to ordinary
shareholders was a record $1.42 billion, or $7.89 per ordinary share, compared
with $1.25 billion, or $6.98 per ordinary share, in the first nine months of
2006. "Net income excluding net realized gains and losses" for the same period
was a record $1.63 billion, or $9.03 per ordinary share, as compared with
$1.25 billion, or $6.95 per ordinary share, in the first nine months of 2006.

Return on ordinary shareholders' equity, based on net income was 13.0% and
19.2% for the three and nine months ended September 30, 2007, respectively.
Return on ordinary shareholders' equity, based on net income excluding net
realized gains and losses was 22.3% and 22.0% for the three and nine months
ended September 30, 2007, respectively.

Commenting on the current quarter results, President and Chief Executive
Officer Brian M. O'Hara said: "I am proud to report that XL has again
delivered to shareholders record operating results for both the quarter and
year to date. All of our segments contributed to these excellent results. Our
investment operations, in the face of challenging market conditions, generated
solid net investment income and returns from investment fund affiliates."

At September 30, 2007, diluted book value per ordinary share was $56.29,
as compared to $54.74 as at June 30, 2007. Basic book value per ordinary
share was $56.45 at September 30, 2007 as compared to $55.01 as at June 30,
2007.

SEGMENT HIGHLIGHTS - THIRD QUARTER 2007 VERSUS THIRD QUARTER 2006

Insurance

Underwriting profit for the quarter ended September 30, 2007 was
$129.7 million compared with $110.7 million in the prior year period. This
increase was due mainly to net favorable prior year development of
$60.7 million, as compared to net favorable prior year development of
$9.5 million in the prior year period. The increase was partially offset by
lower net premiums earned of $1.01 billion compared to $1.02 billion in the
prior year period.

-- Gross premiums written decreased 9.4% primarily due to competitive
market conditions across most lines in the current quarter as well as
continued corporate risk management initiatives.
-- Net premiums written increased by 5.1% through changes in program
structures and favorable pricing conditions on reinsurance purchased.
-- Net premiums earned decreased marginally as a result of the earned
impact of lower levels of gross premiums written in previous quarters.
-- The combined ratio was 87.4% compared with 89.6% for the prior year
period. The loss ratio excluding the impact of net prior year
development for the current and prior year quarter was 68.7% and 63.9%,
respectively.

Reinsurance

Underwriting profit for the quarter ended September 30, 2007 was
$107.2 million compared with $117.0 million for the prior year period. The
decrease is principally due to lower premiums written and earned during the
quarter in comparison to the prior year period. This decrease was partially
offset by higher favorable net prior year development of $83.3 million as
compared with $24.3 million in the prior year quarter.

-- Gross premiums written decreased by 17.7% due primarily to certain
premium adjustments in the prior year quarter, partially offset by
timing differences. Excluding these items, gross premiums written
decreased 8.7%. The decline in gross premiums written was due to
increased retentions by cedants and competitive market conditions.
-- Net premiums earned decreased 13.9% reflecting the effects of lower net
premiums written throughout the year.
-- The combined ratio was 81.3% compared with 82.5% in the prior year
period. The loss ratio excluding the impact of net prior year
development for the current and prior year quarter was 64.6% and 60.2%,
respectively.

Life Operations

Gross premiums written were $140.7 million compared with $113.4 million in
the prior year quarter, principally due to growth in the core portfolio of
regular premium business and favorable foreign exchange impacts. Net income
was $27.0 million as compared with $17.8 million in the third quarter last
year.

Investment Operations

Net investment income from P&C operations, excluding investment income
from Structured Products, increased 15.0% from the prior year period to
$325.5 million primarily due to higher investment yields. Net income from
investment affiliates was $69.4 million in the third quarter of 2007 compared
with $39.4 million in the third quarter of 2006. Net income from investment
manager affiliates increased to $23.2 million as compared to $9.1 million for
the prior year period.

Total net realized losses on investments were $160.2 million in the
quarter compared with net realized losses of $52.7 million in the prior year
period. This includes charges for other-than-temporary impairment of
$110.9 million primarily related to the deterioration in the credit markets.
Most of these losses were borne by our Other Financial Lines operations,
representing our muni-GIC and funding agreement businesses which are
inherently more exposed to events in the credit markets. Net realized losses
on derivatives were $58.2 million compared to a gain in the prior year period
of $0.6 million. Net unrealized losses on investments, net of tax, were
$452.2 million at September 30, 2007 compared with net unrealized losses of
$309.9 million and net unrealized gains of $410.4 million at June 30, 2007 and
December 31, 2006, respectively. The increase in net unrealized losses of
$142.3 million for the quarter and $862.6 million for the nine months ended
September 30, 2007, was substantially due to widening credit spreads on
corporate and structured credit investments, partially offset by the effect of
declining U.S., U.K. and Euro-zone government interest rates. The Company has
also posted on its web-site Structured Credit data to provide detail on its
exposures as at September 30, 2007.

Other Items

During the quarter, the Company repurchased 2.3 million ordinary shares at
an average price of $76.66 per share. Year to date, the Company has
repurchased 13.2 million ordinary shares at an average price of $75.76 per
share. As at September 30, 2007, there were 179.7 million ordinary shares
issued and outstanding. The Company redeemed its Series A preference shares
on August 14, 2007 and declared its first dividend on the Series E preference
shares of $38.64 per share or $38.6 million payable October 15, 2007.

Total operating expenses were $270.5 million, a decrease from
$276.4 million in the quarter ended September 30, 2006. The decrease is due to
operating expenses of SCA included in the prior year quarter, partially offset
by higher compensation costs for business development and performance-based
programs, and the impact of foreign exchange.

Foreign exchange gains were $26.2 million compared with a loss of
$21.9 million in the prior year quarter.

The Company will host a conference call to discuss its third quarter 2007
results on Wednesday, October 24, 2007 at 10:00 a.m. Eastern Time. The
conference call can be accessed through a listen-only dial-in number or
through a live webcast. To listen to the conference call, please dial
(877) 422-4657 or (706) 679-0474, Conference ID# 15842595. The webcast will
be available on XL's website located at www.xlgroup.com and will be archived
on this site from approximately 1:00 p.m. Eastern Time on October 24, 2007
through midnight Eastern Time on November 26, 2007. A slide presentation
accompanying the Company's discussion of its third quarter results will also
be available on the Company's website located at www.xlgroup.com beginning
approximately 15 minutes before the commencement of the conference call.

A telephone replay of the conference call will be available beginning at
approximately 1:00 pm. Eastern Time on October 24, 2007 until midnight Eastern
Time on November 14, 2007 by dialing (800) 642-1687 or (706) 645-9291,
Conference ID #15842595. An unaudited financial supplement relating to the
Company's third quarter 2007 results is available on its website located at
www.xlgroup.com.

XL Capital Ltd, through its operating subsidiaries, is a leading provider
of global insurance and reinsurance coverages to industrial, commercial and
professional service firms, insurance companies and other enterprises on a
worldwide basis. As of September 30, 2007, XL Capital Ltd had consolidated
assets of $60.9 billion and consolidated shareholders' equity of
$11.4 billion. More information about XL Capital Ltd is available at
www.xlgroup.com.

This press release contains forward-looking statements. Statements that
are not historical facts, including statements about XL's beliefs, plans or
expectations, are forward-looking statements. These statements are based on
current plans, estimates, and expectations. Actual results may differ
materially from those included in such forward-looking statements and
therefore you should not place undue reliance on them. A non-exclusive list of
the important factors that could cause actual results to differ materially
from those in such forward-looking statements includes the following:
(a) greater frequency or severity of claims and loss activity than XL's
underwriting, reserving or investment practices anticipate based on historical
experience or industry data; (b) trends in rates for property and casualty
insurance and reinsurance; (c) developments in the world's financial and
capital markets that adversely affect the performance of XL's investments or
access to such markets; (d) changes in general economic conditions, including
foreign currency exchange rates, inflation and other factors; and (e) the
other factors set forth in XL's most recent reports on Form 10-K, Form 10-Q,
and other documents on file with the Securities and Exchange Commission, as
well as management's response to any of the aforementioned factors. XL
undertakes no obligation to update or revise publicly any forward-looking
statement, whether as a result of new information, future developments or
otherwise.

(1) Defined as net income excluding net realized gains and losses on
investments, net realized and unrealized gains and losses on credit,
structured financial and investment derivatives, net of tax, for the Company
and its share of these items for Security Capital Assurance Ltd ("SCA") and
the Company's other insurance company operating affiliates, herein referred to
as "net income excluding net realized gains and losses". "Net income excluding
net realized gains and losses" is a non-GAAP measure. See the schedule
entitled "Reconciliation" at the end of this release for a reconciliation of
net income/loss excluding net realized gains and losses to net income
available to ordinary shareholders.

The following is a reconciliation of the Company's (i) net income (loss)
available to ordinary shareholders to 'net income (loss) excluding net
realized gains and losses on investments and net realized and unrealized gains
and losses on credit, structured financial and investment derivatives, net of
tax' for the Company and its share of these items for SCA and the Company's
other insurance company operating affiliates (which is a non-GAAP measure, the
"Exclusions") and (ii) annualized return on ordinary shareholders' equity
(based on net income (loss) minus the Exclusions) to average ordinary
shareholders' equity for the three and nine months ended September 30, 2007
and 2006 (U.S. dollars in millions, except per share amounts):

This press release contains the presentation of (i) net income (loss)
excluding net realized gains and losses on investments, net realized and
unrealized gains and losses on credit, structured financial and investment
derivatives, net of tax, for the Company and its share of these items for SCA
and the Company's other insurance company operating affiliates (the
"Exclusions") and (ii) annualized return on ordinary shareholders' equity
(based on net income minus the Exclusions) to average ordinary shareholders'
equity. These items are "non-GAAP financial measures" as defined in
Regulation G. The reconciliation of such measures to the most directly
comparable GAAP financial measures in accordance with Regulation G is included
above.

XL presents its operations in the way it believes will be most meaningful
and useful to investors, analysts, rating agencies and others who use XL's
financial information in evaluating XL's performance. This presentation
includes the use of 'net income excluding net realized gains and losses on
investments, net realized and unrealized gains and losses on credit,
structured financial and investment derivatives, net of tax for the Company
and its share of these items for SCA and the Company's other insurance company
operating affiliates'. Investment derivatives include all derivatives entered
into by XL other than weather and energy and credit derivatives (discussed
further below).

Although the investment of premiums to generate income (or loss) and
realized capital gains (or losses) is an integral part of XL's operations, and
of those of SCA and the Company's other insurance company operating
affiliates, the determination to realize capital gains (or losses) is
independent of the underwriting process. In addition, under applicable GAAP
accounting requirements, losses can be created as the result of other-than-
temporary declines in value without actual realization. In this regard,
certain users of XL's financial information, including certain rating
agencies, evaluate earnings before tax and capital gains to understand the
profitability of the recurring sources of income without the effects of these
two variables. Furthermore, these users believe that, for many companies, the
timing of the realization of capital gains is largely opportunistic and are a
function of economic and interest rate conditions. In addition, with respect
to credit derivatives, because XL and its insurance company operating
affiliates generally hold financial guaranty contracts written in credit
default derivative form to maturity, the net effects of the changes in fair
value of these credit derivatives are excluded (similar with other companies
in the financial guarantee business) as the changes in fair value each quarter
are not indicative of underlying business performance. Unlike these credit
derivatives, XL's weather and energy derivatives are actively traded (i.e.,
they are not held to maturity) and are, therefore, not excluded from net
income as any gains or losses from this business are considered by management
when evaluating and managing the underlying business.

In summary, XL evaluates the performance of and manages its business to
produce an underwriting profit. In addition to presenting net income (loss),
XL believes that showing net income (loss) exclusive of the items mentioned
above enables investors and other users of XL's financial information to
analyze XL's performance in a manner similar to how management of XL analyzes
performance. In this regard, XL believes that providing only a GAAP
presentation of net income (loss) makes it much more difficult for users of
XL's financial information to evaluate XL's underlying business. Also, as
stated above, XL believes that the equity analysts and certain rating agencies
that follow XL (and the insurance industry as a whole) exclude these items
from their analyses for the same reasons and they request that XL provide this
non-GAAP financial information on a regular basis.

Return on average ordinary shareholder's equity ("ROE"), excluding net
realized gains and losses on investments and net realized and unrealized gains
and losses on credit and investment derivative instruments, net of tax, for
the Company and its share of these items for SCA and the Company's other
insurance company operating affiliates (the "Exclusions"), is a widely used
measure of any company's profitability. Annualized return on average ordinary
shareholders' equity (minus the Exclusions) is calculated by dividing
annualized net income minus the Exclusions for any period by the average of
the opening and closing ordinary shareholders' equity. The Company establishes
target ROE's for its total operations, segments and lines of business. If the
Company's ROE return targets are not met with respect to any line of business
over time, the Company seeks to re-evaluate these lines. In addition, the
Company's compensation of its senior officers is significantly dependant on
the achievement of the Company's performance goals to enhance shareholder
value which include ROE.